Shortly before the Federal Reserve is expected to deliver a potential jumbo rate hike, this strategist identifies what he thinks is the single-best bad news fighting asset right now.
We’re one day away from finding out whether the Fed can deliver a potential jumbo rate hike without crushing the market.
But our call of the day from Warren Pies, co-founder and strategist at 3Fourteen Research, sees energy as the hedge for any bad news in the pipeline. As he notes, after years of moving in opposite directions, equities and bonds have been falling together. “If we move forward fully sanctioning Russian oil and really getting off this stalemate that’s going on right now and posturing, the world’s going to be short a lot of oil,” and that will create “one heck of a recession,” he said. “Oil is going to do its own thing…That’s why you need to have oil exposure through energy in your portfolio.”
What he’s been suggesting to clients is a 10% to 20% energy position, given the sector represents 5% of the S&P 500 SPX, +0.69%, and then whittle the rest of the portfolio to quality companies. “You’re just trying to sidestep the unprofitable tech stuff,” said Pies. And in the worst case the S&P 500 drops to 3200? “We could be another 10% lower, but if you can’t handle a 10% drawdown in this business, you’re in the wrong business,” said Pies.The markets Stock futures ES00, -0.70% YM00, -0.66% NQ00, -0.72% are moving lower, with bond yields TMUBMUSD02Y, 3.979% TMUBMUSD10Y, 3.574% rising and oil prices CL.1, +0.29% steady. The dollar DXY, +0.38% is higher and bitcoin BTCUSD, -2.67% is hovering just above $19,000.
SPAC ‘King’ Chamath Palihapitiya is winding down two vehicles IPOD, +0.20% IPOF, +0.10% after failing to find target companies in time.Apple AAPL, +2.51% is raising the price of apps and in-app purchases across parts of Asia and any country that uses the euro. Shares are slipping.
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